Costs derail Egypt's petrochemicals masterplan

17 July 2008
Echem postpones projects as engineering, procurement and construction costs push schemes over budget.

Egypt’s petrochemicals master-plan has been hit by surging engineering, procurement and construction (EPC) costs, derailing some projects and substantially delaying others.

State-owned Egyptian Petrochemicals Holding Company (Echem), the firm responsible for implementing the country’s 20-year petrochemicals masterplan, has had to postpone several planned projects because schemes already under way have come in substantially over budget.

The three-phase masterplan, launched in 2002, calls for the development of 14 petrochemicals complexes with a total of 24 projects, which between them will produce more than 15 million tonnes a year (t/y) of intermediate and final products.

The plan aims to create 100,000 jobs, with an initial investment cost of $10bn.

However, the projected investment cost has doubled to $20bn. Helping to offset this, rising chemical prices will mean that revenues are also likely to double from the original estimate of $7bn.

“We had a budget of $3.5bn for the first phase implementation, but in the end it exceeded $6bn,” says Osama Kamal, vice-president for planning and projects at Echem. “There have been some massive increases in EPC costs.”

The first phase of the plan called for the development of eight projects by 2008.

Six of them - including methanol, polystyrene and urea units - are under construction, but two others - the planned polyethylene and polyvinyl chloride (PVC) plants - have been substantially delayed. The PVC scheme involves the construction of a plant with a capacity of 150,000 t/y at Alexandria with an estimated cost of $400m.

“Jacobs [Engineering] has finalised the feasibility study and we are currently promoting the product [to foreign investors],” says Kamal. “We hope to have it on stream by 2011.”

The implementation of the polyethylene project will start once its final site location has been determined. The original plan called for a facility to be built on the northern coastal road with capacity of 750,000-1 million t/y of polyethylene at a cost of more than $1.7bn.

However, a feasibility study will be carried out to determine whether it is more cost effective to build a facility or integrate the project with the existing Sidi Kerir Petrochemical Company (Sidpec) complex near Alexandria.

There have also been problems with another phase one scheme: the 1.4 million-t/y urea and ammonia fertiliser complex at Damietta, planned by Agrium Egypt for Nitrogenic Products (EAgrium). Local residents are protested against the location of the facility, saying it will cause unnecessary pollution.

“The original plan was to have it come on stream in the second quarter of 2010,” says Kamal. “But we are looking at a six-month delay. There are no environmental or health concerns.”

With phase one nearing completion, Echem has started presenting its phase two projects to investors. Four of the eight projects are being actively promoted with a view to completing them by 2016.

The largest is the $2.3bn gas-to-olefins (GTO) complex on the northern coastal road. Still a relatively new technology, the scheme involves converting natural gas directly to olefins and cutting out intermediate steps.

Also under phase two is a $1.5bn aromatics complex to produce 1 million t/y of benzene and xylene, and a 310,000-t/y polyester plant at Damietta.

Perhaps the most significant scheme is a $80m, 200,000-t/y dimethyl ether (DME) facility also planned for Damietta.

Touted as an alternative to diesel, gasoline and liquefied petroleum gas, the technology is again experimental.

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